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Storing vital products with care HALF YEAR REPORT 2017
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Forward-looking statements
This document contains ‘forward-looking statements’ based on currently available plans and forecasts. By
their nature, forward-looking statements involve risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future, and Vopak cannot guarantee the
accuracy and completeness of forward-looking statements.
These risks and uncertainties include, but are not limited to, factors affecting the realization of ambitions
and financial expectations, developments regarding the potential capital raising, exceptional income and
expense items, operational developments and trading conditions, economic, political and foreign exchange
developments and changes to IFRS reporting rules.
Statements of a forward-looking nature issued by the company must always be assessed in the context of
the events, risks and uncertainties of the markets and environments in which Vopak operates. These
factors could lead to actual results being materially different from those expected, and Vopak does not
undertake to publicly update or revise any of these forward-looking statements.
Financial calendar
06 November 2017 Publication of 2017 third-quarter interim update
16 February 2018 Publication of 2017 annual results
18 April 2018 Publication of 2018 first-quarter interim update
18 April 2018 Annual General Meeting
20 April 2018 Ex-dividend quotation
23 April 2018 Dividend record date
25 April 2018 Dividend payment date
17 August 2018 Publication of 2018 half-year results
05 November 2018 Publication of 2018 third-quarter interim update
14 February 2019 Publication of 2018 annual results
About Royal Vopak
Royal Vopak is the world’s leading independent tank storage company. We operate a global network of
terminals located at strategic locations along major trade routes. With over 400 years of history and a
strong focus on safety and sustainability, we ensure efficient, safe and clean storage and handling of bulk
liquid products and gases for our customers. By doing so, we enable the delivery of products that are vital
to our economy and daily lives, ranging from oil, chemicals, gases and LNG to biofuels and vegoils. Vopak
is listed on the Euronext Amsterdam stock exchange and is headquartered in Rotterdam, the Netherlands.
Including our joint ventures and associates, we employ an international workforce of over 5,500 people. As
of 18 August 2017, Vopak operates 67 terminals in 25 countries with a combined storage capacity of 35.9
million cbm, with another 3.2 million cbm under development, to be added before the end of 2019.
Visiting address Postal address
Westerlaan 10 P.O. Box
3016 CK Rotterdam 3000 AW Rotterdam
The Netherlands The Netherlands
For more information please contact:
Press: Liesbeth Lans, Manager External Communication
Telephone: +31 (0)10 400 2777, e-mail: [email protected]
Analysts and investors: Anil Acardag, Manager Investor Relations
Telephone: +31 (0)10 400 2776, e-mail: [email protected]
This press release contains inside information as meant in clause 7 of the Market Abuse Regulation.
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Royal Vopak
First Half Year Report 2017
Contents
Interim Management Report 3
Key events HY1 2017 3
CEO statement 4
Key figures 5
Business and other highlights 6
Sustainability review 8
Financial review 9
Risks and risk management 12
Market developments 13
Storage capacity developments 15
Results HY1 2017 by division 16
- Netherlands 16
- Europe, Middle East & Africa (EMEA) 16
- Asia 17
- Americas 18
- LNG 18
- Global functions 18
Statement by the Executive Board 19
Condensed interim consolidated financial statements 20
Consolidated statement of income 20
Consolidated statement of comprehensive income 21
Condensed consolidated statement of financial position 22
Condensed consolidated statement of changes in equity 23
Condensed consolidated statement of cash flows 24
Segmentation 25
Notes to the condensed interim consolidated financial statements 26
1. General 26
2. Acquisitions, divestments, and newly established entities 28
3. Financial risk management 29
4. Exceptional items 30
5. Intangible assets, property, plant & equipment and financial assets 31
6. Joint ventures and associates 32
7. Issued capital, share premium and treasury shares 33
8. Borrowings 34
9. Contingent liabilities 35
10. Related party disclosures 35
11. Subsequent events 35
Enclosures: 36
1. Non-IFRS proportionate financial information 36
2. Key results second quarter 37
3. Glossary 38
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Interim Management Report
Key events HY1 2017
Rotterdam, the Netherlands, 18 August 2017
Highlights for HY1 2017:
● Results in the Netherlands are below expectations, the results for EMEA, Asia and LNG
are in line with outlook, while the Americas results are above expectations
● Average occupancy rate for the period is 91% (HY1 2016: 94%)
● EBITDA -excluding exceptional items- decreased (6%) to EUR 394 million, adjusted for
the divestments early 2016, the pro forma EBITDA decreased by 4%
● Total capacity of announced new growth projects amounts to 387,000 cbm.
In addition, Vopak will expand Pengerang oil terminal in Malaysia with 430,000 cbm
and Alemoa terminal in Brazil with 44,900 cbm
● Efficiency program to reduce Vopak’s future cost base with at least EUR 25 million by
2019 is well underway; decisions are taken to further streamline the divisional
structure
Exceptional items for HY1 2017:
● There were no material exceptional items in the first half of 2017. The large exceptional profit
in the first half of 2016 related mainly to the divestment of the UK assets
Looking ahead:
● For 2017, we expect to realize an average occupancy rate of around 90% (2016: 93%).
Taking into account the lower occupancy rates, additional costs related to investments in
growth and technology, the missing contributions from the divested terminals early 2016 and
the foreign currency exchange developments in 2017, we expect that the 2017 EBITDA will
be 5-10% lower than the 2016 EBITDA (EUR 822 million)
● We are on track with the timely completion of the current projects under construction
(3.2 million cbm), of which most are backed by commercial storage contracts, and the
successful realization of the efficiency program
● Supported by solid operational cash flow generation, a strong balance sheet and sufficient
financial flexibility, Vopak will continue its capital disciplined long-term growth journey,
while maintaining on average a Cash Flow Return On Gross Assets after tax (CFROGA)
between 9-11% for the total portfolio in the period 2017-2019
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Royal Vopak Chief Executive Officer Eelco Hoekstra commented:
“Although our EBITDA is lower compared to last year, I am encouraged with the ongoing transition of
our global portfolio. While focusing our business development efforts more on projects related to
chemical and industrial terminals, and terminals facilitating the global gas markets, including our
ambitions to strengthen our presence as a service provider in the LNG infrastructure market, we are
still pursuing oil related opportunities in emerging countries.
HY1 2017 EBITDA -excluding exceptional items- of EUR 394 million reflects a positive market
sentiment in the Americas and a stable business environment for our terminals in Asia and EMEA,
while the market environment in the Netherlands has weakened compared to 2016.
Although we cannot influence the supply and demand of commodities in a business environment
characterized by increasing competition, geopolitical developments and volatility in the energy and
financial markets, we can influence the quality of our capital investments, lowering operating costs
and improving our service. We continuously seek to improve our safety and sustainability
performance, while stepping up the quality of our operations and increasing productivity, supported by
the application of new technologies. This will help reduce Vopak’s future cost base with at least
EUR 25 million in the 2017-2019 period.
In order to support the successful realization of our 2019 ambitions, we have defined several actions
throughout the various levels of the organization, from further streamlining the divisional structure of
the company to simplifying processes, thereby improving the ease of doing business with Vopak.
The outcome of these efforts will help deliver better value for money to our customers, thereby
strengthening our competitiveness.
The coming years will be another exciting period in which we want to further improve our leadership
position and I believe that despite the lower results in 2017 the current profile of the company, taking
into account the solid operational cash flow generation, strong balance sheet and sufficient financial
flexibility, provides an excellent platform to continue our long-term focused capital disciplined growth
journey.”
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Key figures
* For the definition of CFROGA reference is made to Enclosure 3 in this report
** Vopak provides Non-IFRS proportionate financial information, for further details reference is made to Enclosure 1 in this
report
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Business and other highlights
HY1 2017 events:
● On 17 February 2017, Vopak and its partner Reatile announced that they will expand their
activities in South Africa. The expansion comprises two projects; a) a new 100,000 cbm
inland terminal in the Gauteng province (Johannesburg) connected to Vopak Terminal Durban
via the Transnet Multi Product Pipeline and b) an expansion of Vopak Terminal Durban with
130,000 cbm
● On 19 April 2017, Vopak announced that it will expand its wholly-owned terminal in Alemoa,
which is located in Brazil's Port of Santos, Latin America's largest port. The expansion will
add 16 new tanks with a capacity of 61,000 cbm. In addition, five additional truck loading bays
will be constructed that are designed to handle up to 130 additional trucks per day.
The expansion is expected to be commissioned in Q2 2019
● On 26 April 2017, after careful consideration, Vopak and Exmar jointly concluded that the
closing of the envisaged acquisition by Vopak of Exmar’s participation in FRSU assets would
no longer be pursued. The finalization of the deal was subject to consent and cooperation of
multiple stakeholders, which was not realized
● On 6 May 2017, Royal Vopak and AltaGas Ltd. (AltaGas) announced that they have entered
into a joint venture agreement and will invest together in the development of the Ridley Island
Propane Export Terminal (RIPET). RIPET will be the first propane export facility off the west
coast of Canada. The project is to be designed to ship 1.2 million tonnes of propane per
annum, with approximately 96,000 cubic meters of storage capacity. The facility is expected
to be commissioned in Q1 2019. Vopak has a 30 percent interest in RIPET
Subsequent events:
● On 21 July 2017, it was announced that Gasunie LNG Holding B.V., Oiltanking GmbH and
Vopak LNG Holding B.V. have acquired the approval under the EU Merger Regulation to
establish a joint venture for owning and operating a liquefied natural gas (LNG) terminal in
Northern Germany. This decision is a milestone within the feasibility study the companies are
currently conducting
● On 18 August 2017, it was announced through a separate press release that Vopak and its
joint venture partners have the intention to expand their independent storage terminal (PITSB)
in Pengerang, Johor in southern Malaysia. PITSB will be expanded with 430,000 cbm to a
total capacity of 1.7 million cubic meters.The expansion is expected to be commissioned Q1
2019
● On 18 August 2017, Vopak announces that it will further expand its wholly-owned terminal in
Alemoa which is located in the Port of Santos, Latin America’s largest port. This expansion is
in addition to the expansion announced on 19 April 2017. The expansion will add another
44,900 cbm to Vopak’s Alemoa Terminal. The total capacity of the terminal after the
expansion will be 279,900 cbm. The investment is underpinned by long-term customer
contracts and is expected to be commissioned in Q2 2019
Other:
● At the Annual General Meeting held on 19 April 2017, Mrs H.B.B. Sørensen was appointed as
a member of the Supervisory Board as per that date for a term of four years.
Mr R.G.M. Zwitserloot was re-appointed as a member of the Supervisory Board for a new
term of four years
● Effective per 1 January 2018, Vopak will streamline its divisional structure, resulting in a
situation where the Group will comprise of five divisions instead of the current six.
The five divisions will be Europe & Africa, Asia & Middle East, China/North Asia, Americas
and LNG
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This is amongst others a part of the organizational and operational efficiency programs in
relation to the earlier announced strategic direction for the period 2017-2019
● In line with the resignation schedule Mr Frans Cremers, Chairman of the Audit Committee,
will step down from the Supervisory Board following the Annual General Meeting to be held
on 18 April 2018. It will be proposed to appoint Mr Ben van der Veer as member of the
Supervisory Board, ultimately during the Annual General Meeting to be held on 18 April 2018.
Mr Ben van der Veer has an extensive senior management experience gained in various
executive and non-executive functions at internationally operating companies
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Sustainability review
To Vopak, sustainability means generating added value for our stakeholders, from customers,
business partners and investors, to governments, local communities and society at large without
causing any human suffering or unacceptable negative social and environmental impact. We are
committed to improving our personal and process safety, minimizing our energy and water
consumption and emissions to soil, air, surface and sewage water. We report on our progress in the
Annual Report. The sustainability information in the Annual Report 2016 covers all relevant objectives
and achievements.
The year 2017 started off with a regretful and deeply tragic fatal accident due to a fall from height at
our ACS terminal in Antwerp (Belgium) involving a well-respected contractor. This is a reminder to all
of us that we need to continue to focus on how to further improve our safety culture, systems and
hardware to ensure a safe working place for all.
On 28 May, a third party fatality (homicide) occurred at our joint venture terminal Uniao-Vopak
Armazens Gerais in Brazil at the truck off-site parking lot located 800 meter away from the terminal
committed by a third party truck driver. The cause of the homicide is still under investigation by local
police. The terminal is reviewing ways to further improve security measures at the parking lot.
In terms of personal safety, the TIR, measured as the number of injuries per 200,000 hours worked,
increased to 0.40 (HY1 2016: 0.19). The combined total injuries (between own employees and
contractors) in the first half of 2017 almost doubled: 31 injuries compared to the 16 injury events
recorded in HY1 2016. This is mainly driven by an increase of injury cases in the ARA region.
The Lost Time Injury Rate (LTIR, per 200,000 working hours) for own employees and contractors also
increased to 0.12 (HY1 2016: 0.08).
In terms of Tier 1 and Tier 2 process safety event rate (PSER), the PSER increased to 0.30
(HY1 2016: 0.23).
In our emissions to soil, surface and sewage water, we had 31 spills representing a total of
628 metric tons product (HY1 2016: 27 spills representing 713 metric tons) of which one major
(recovered) spill of 450 metric tons of gasoil at our Eurotank terminal (Belgium).
We consider these trends concerning in relation to our continuous improvement aim and we are
further intensifying our efforts to turn our performance around.
9
Financial review
Revenues
In the first half year of 2017, Vopak’s revenues amounted to EUR 669.3 million, which was
EUR 10.6 million (2%) lower than the first six months of 2016 (EUR 679.9 million). Excluding the
positive currency translation effect of EUR 8.6 million, the decrease amounted to EUR 19.2 million.
The effects of the divestments of early 2016 were EUR 17.1 million. The lower revenues in the
Netherlands were partially offset by higher revenues mainly in the Americas.
The average occupancy rate for Vopak’s subsidiaries (i.e. excluding joint ventures and associates)
for the first six months of 2017 decreased to 91% compared to 94% in the first half year of 2016.
This decrease is for a large part attributable to the Netherlands division.
Vopak’s worldwide storage capacity increased with 2.3 million cbm from 33.6 million cbm per the end
of June 2016 to 35.9 million cbm per the end of June 2017. This increase primarily relates to the new
operatorship of storage caverns in Singapore and additional capacity at our associate in Saudi Arabia.
Group operating profit
Group operating profit before depreciation and amortization (EBITDA) -excluding exceptional items-
and including the net result of joint ventures and associates, decreased by EUR 26.8 million (6%) to
EUR 394.1 million (HY1 2016: EUR 420.9 million). Excluding the positive currency translation effect of
EUR 3.9 million, the decrease amounted to EUR 30.7 million, to a large extent explained by the lower
revenues due to a lower occupancy, and higher expenses. In comparison to last year, the
divestments completed early 2016 did not contribute to the results in the first six months of 2017,
which had an adverse effect of EUR 10.1 million.
Operating expenses -excluding exceptional items- increased by EUR 12.3 million to
EUR 342.3 million (HY1 2016: EUR 330.0 million). Excluding the negative currency translation effect
of EUR 5.6 million and the positive effects of the divestments of EUR 8.3 million, the increase
amounted to EUR 15.0 million. This increase in expense is to a large extent due to newly added
capacity and new operatorships.
The net result of joint ventures and associates -excluding exceptional items-, which is included in the
reported EBIT(DA) based on IFRS equity accounting, decreased by EUR 1.3 million or 2% to
EUR 61.4 million (HY1 2016: EUR 62.7 million). Excluding the positive currency translation effect of
EUR 0.9 million, the decrease amounted to EUR 2.2 million. This decrease was mainly due to a
slightly lower performance of joint venture terminals in the EMEA division and Asia division.
Depreciation and amortization charges amounted to EUR 136.0 million, which was EUR 6.1 million
(5%) higher compared to the first half year of 2016 (EUR 129.9 million). Excluding the negative
currency translation effect of EUR 1.9 million, the increase amounted to EUR 4.2 million. The higher
depreciation and amortization charges are primarily related to capacity increases at existing terminals
mainly in the EMEA and Americas division.
Group operating profit (EBIT) -excluding exceptional items- amounted to EUR 258.1 million;
a decrease of EUR 32.9 million (11%) compared to EUR 291.0 million in the same period of 2016.
Excluding the positive currency translation effect of EUR 2.0 million, the decrease amounted to
EUR 30.9 million. The adverse effect of the divestments completed early 2016 amounted to
EUR 10.1 million.
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Exceptional items
During HY1 2017, an immaterial exceptional loss before taxation of EUR 2.1 million (HY1 2016: an
exceptional gain of EUR 206.1 million) was recognized, related to a scope change of a business
development project in the Netherlands.
Including exceptional items, group operating profit amounted to EUR 256.0 million in HY1 2017,
which is a decrease of EUR 241.1 million (49%), compared to EUR 497.1 million in the same period
of 2016. The 2016 exceptional gain primarily related to the divestment of the UK assets.
Net profit attributable to holders of ordinary shares
In the first six-month period of 2017 the net profit attributable to holders of ordinary shares
-excluding exceptional items- decreased by EUR 23.5 million (14%) to EUR 150.4 million from
EUR 173.9 million in the same period of 2016.
Net profit attributable to holders of ordinary shares -including exceptional items- amounted to
EUR 148.8 million, a decrease of EUR 235.8 million or 61% compared to EUR 384.6 million in the first
half of 2016.
Earnings per ordinary share -excluding exceptional items- decreased by 13% to EUR 1.18
(HY1 2016: EUR 1.36). The weighted average number of outstanding ordinary shares was
127,480,709 for HY1 2017 (HY1 2016: 127,532,581). Including exceptional items, the earnings per
ordinary share decreased by 61% to EUR 1.17 (HY1 2016: EUR 3.02).
Gross cash flows from operating activities
The gross cash flows from operating activities for the first half year of 2017 of EUR 321.0 million were
14% lower compared to prior year (HY1 2016: EUR 374.2 million), following the movement of the
operating profit.
Strategic investments and divestments
Investments and divestments
Total non-current assets decreased with EUR 183.5 million to EUR 4,790.5 million
(31 December 2016: EUR 4,974.0 million). In the first half year of 2017, total investments amounted
to EUR 194.6 million (HY1 2016: EUR 173.9 million), of which EUR 116.5 million was invested in
property, plant and equipment (HY1 2016: EUR 139.5 million). The remainder primarily relates to
investments in joint ventures and associates of EUR 16.4 million and loans granted of
EUR 50.6 million.
Of the investments in property, plant and equipment, EUR 26.2 million was invested in expansions at
existing terminals (HY1 2016: EUR 41.0 million).
As part of the strategic direction for the period 2017-2019, Vopak aims to spend a maximum of
approximately EUR 750 million on sustaining and service improvement capex for the period 2017-
2019. In addition, Vopak has decided to invest approximately EUR 100 million in the period 2017-
2019 in new technology and innovation programs as well as replacing its IT systems.
The service, maintenance, compliance and IT capex for the first half year of 2017 amounted to
EUR 96.3 million (HY1 2016: EUR 104.3 million).
Impairments
There were no material impairments recognized in the first half of 2017 (HY1 2016: 53.6 million).
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Cash flows from investing and divesting activities
The cash outflows from investing activities for the first half year of 2017 amounted to
EUR 195.8 million (HY1 2016: cash inflow of EUR 370.6 million). This difference of EUR 566.4 million
is primarily related to the proceeds from the divestment of the UK assets early 2016 of
EUR 414.6 million.
Capital Structure
Equity
The equity attributable to holders of ordinary shares increased by EUR 39.4 million to
EUR 2,439.1 million (31 December 2016: EUR 2,399.7 million). The increase mainly resulted from the
addition of the net profit for the period of EUR 148.8 million, the net actuarial gains on defined benefit
plans of EUR 68.4 million, other items of Other Comprehensive Income of EUR 42.4 million and the
dividend payments in cash of EUR 133.9 million (EUR 1.05 per ordinary share with a nominal value of
EUR 0.50).
Net debt
The net interest-bearing debt decreased with EUR 36.6 million to EUR 1,767.6 million
(31 December 2016: EUR 1,804.2 million). This decrease is mainly related to the cash flow generated
during the period, together with the positive effects of foreign exchange differences.
During the first half year of 2017, EUR 102.7 million (EUR 12.5 million and USD 100 million)
(HY1 2016: EUR 346.8 million, including early repayments) of debt repayments took place. For the
remainder of 2017, EUR 63.8 million (EUR 20 million and USD 50 million) of regular repayments on
long-term loans are scheduled.
The Senior Net Debt : EBITDA ratio was 2.20 as at 30 June 2017, which is higher than the previous
period (31 December 2016: 2.04), and well below the maximum agreed ratios in the covenants with
the lenders.
Net finance costs
In the first half of 2017, the Group's net finance costs -excluding exceptional items- amounted to
EUR 52.3 million (HY 2016: EUR 55.9 million). This decrease of EUR 3.6 million is primarily caused
by lower interest expenses in 2017, whereas in 2016 a make-whole payment of EUR 4.4 million
relating to the voluntary early redemption of the SGD Asian PP loan was included, following the cash
proceeds of the divestments early 2016.
The average interest rate over the reporting period, including the effect of hedge accounting, was
4.44% (HY1 2016: 4.35%). The fixed-to-floating ratio of the long-term interest-bearing loans, including
interest rate swaps, amounted to 99% versus 1% at 30 June 2017, in line with the same period last
year.
Cash flows from financing activities
The cash outflow from financing activities amounted to EUR 281.8 million (HY1 2016: outflow of
EUR 551.0 million). This decrease in the cash outflows from financing activities of EUR 269.2 million
was for a large part the result of the 2016 early prepayment of loans of EUR 174.1 million, while such
early prepayments are not present in 2017. In addition, in 2017 the company utilized part of its short
term credit facilities for EUR 22.7 million, while in the previous year the company fully repaid these
facilities for the amount of EUR 56.8 million.
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Income taxes
Income tax expense -excluding exceptional items- for the first half year of 2017 amounted to
EUR 33.8 million, a decrease of EUR 4.9 million (13%) compared with EUR 38.7 million in the same
period of 2016. The effective tax rate -excluding exceptional items- for the first half year of 2017 of
16.4% is in line with 16.5% for the first half year of 2016.
The tax effect on exceptional items for group companies was immaterial (HY1 2016: EUR 4.5 million).
Income tax expense -including exceptional items- for the first half year of 2017 amounted to
EUR 33.3 million, which is in line with EUR 34.2 million in the same period of 2016.
The effective tax rate -including exceptional items for the first half year of 2017 was 16.3% compared
to 7.8% in HY1 2016. This increase is primarily caused by the 2016 tax effect of the Dutch
participation exemption on the gain on the divestment of three terminals and a development project in
the United Kingdom.
Joint ventures and associates
Joint ventures and associates are an important part of the Group for which equity accounting is
applied. In Enclosure 1 to this first half year report the effects of non-IFRS proportionate consolidation
on the statement of financial position and statement of income of the Group are presented.
Risks and risk management
Vopak’s enterprise risk management program, which is coordinated by the Global Risk Committee,
provides the Executive Board with a comprehensive detailed understanding of the Group’s principal
risks and uncertainties, their development and the actions taken by management to mitigate these
risks and uncertainties.
As part of the company’s regular periodic risk management assessment, the Global Risk Committee
has coordinated and monitored the risk management process during the first half of 2017.
The outcome and conclusions of this process have been reported to and discussed with the
Executive Board and the Audit Committee of the Supervisory Board. From this process, no substantial
new developments have been observed that materially change the risk appetite and the risks
identified to those reported in our 2016 Annual Report.
Looking forward, we have no indication that there will be material changes in this respect that would
adversely affect our business over the second half of 2017.
Reference is made to the 2016 Annual Report, which describes in detail our risk management
framework and the main risks per pillar of the Group’s strategy that could adversely affect the
achievement of the company’s strategic objectives and our (future) operating results, cash flows and
financial position (reference pages 102 to 113 and page 129).
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Market developments
Vopak continuously reviews the latest trends in the energy, manufacturing and food and agriculture
markets. We closely work together with our partners and customers to translate these developments
into new opportunities and anticipate their impact on our business.
Crude oil and oil products
Even with the continuation of OPEC production cuts, led by Saudi Arabia and Russia (non-OPEC),
crude oil prices remained under pressure in the first half of 2017. This was mainly due to the further
recovery of shale oil production in the US, which is re-emerging as the global engine for oil supply
growth.
After a weak start of the year, global demand for oil products has been strengthening. In the first six
months of 2017, diesel demand picked up in OECD countries reflecting economic recovery.
The contrary is seen in non-OECD with limited growth due to a slow recovery in China. Gasoline
demand in OECD has been lagging but is expected to pick-up in light of the US driving season.
Jet demand remains very solid globally.
Vopak has benefited from this market sentiment with healthy occupancy rates and solid throughput
levels, specifically for crude oil and refined products. However, within the fuel oil segment, we see the
demand for storage and handling services weakening as a result of a tougher market environment for
our customers caused by a backwardated market, lower blending margins and a decline in total
volumes ex Baltics by-passing Rotterdam.
Chemicals and gases
The US Gulf Coast remains one of the key investment regions for petrochemical companies, thanks
to the abundance of cheap feedstock. During the start of the year, heavier feedstocks such as
naphtha were preferred over ethane as feedstock in the US, driven by strong co-product prices. In
Q2, ethane returned to being the advantaged feed in the region. These developments continue to
support the steady growth in Vopak’s chemicals business in the Americas.
Most petrochemical companies in Europe remain conservative with expanding or upgrading their
capacities, while demand in the region is expected to maintain its steady growth path.
The Middle East continues to contend with a more self-sufficient Asia and a mature Europe as it
grows its production of polymers and other chemicals throughout 2017, adding to an increasing
supply glut. In Asia, margin pressures are increasing among domestic chemicals producers due to an
overcapacity in basic commodities and in certain value chains. Lower crude prices, resulting in
cheaper naphtha and propane feedstock costs, have enabled cracker and PDH operators to run their
units at full tilt due to wider production margins. Demand for chemicals in the region continues to be
healthy, supported by stable growth in end-markets, including manufacturing, automotive and
construction.
Propane exports from the Americas to Asia are expected to increase further, in particular exports from
West Canada to Asia directly, supported by the new Ridley Island Propane Export Terminal (RIPET);
expected to be operational in 2019. On a regional level we observe that LPG demand has been
growing the most in India, mainly driven by governmental subsidies that promote the shift from
kerosene to LPG for domestic purposes. Finally, in respect to lower butane and propane prices due to
seasonality in demand, the economics are currently in favor of cracking LPG instead of naphtha in the
ARA region.
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Biofuels and vegoils
Biofuels
Legislation and trade policies continue influencing the biofuels and feedstock flows, which at present
is considered to be moving into a positive direction for the trade flows in Europe. In contrast, the
biofuel market in the US is marked by uncertainty around the new administration’s intentions
concerning biodiesel imports, related to the antidumping and countervailing duty petition filed against
Argentinian and Indonesian product. The request of a tax to be imposed on imports of biodiesel could
significantly decrease the volumes brought into the US. Additionally, Brazil's sugar industry group is
seeking the introduction of an ethanol import tariff, one of the increasing destination of US surplus.
Vegoils
The vegoils market has been good for the first half of 2017, supporting our terminals in the
Netherlands and the Americas. Economic growth in Brazil started to regain momentum, even with the
current political crisis. This has started to positively impact a few sectors, such as the food and
agriculture market, which is expected to recover further.
LNG
Qatar has been at the center of a geopolitical conflict in the Middle East, as a number of Arab
countries cut diplomatic ties to the Gulf state in June this year. For now, the global LNG market is
largely unaffected. However, if tensions escalate, there could be implications for global gas flows.
Although the likelihood of any major impact is low, the threat is expected to feed into greater short-
term volatility and risk for spot markets.
LNG demand is forecast to increase further in 2017. China and India will be among the top growth
regions during the year, supported by an increase in contracted Australian supply. In the first half of
the year, Northeast Asian demand has been relatively strong owing to a cold winter and temporary
nuclear outages in Japan. Pakistan remains a high-growth potential market for LNG, as its imports
have been growing substantially over the past two years. European demand growth has been modest
so far this year.
15
Storage capacity developments
Since the end of December 2016, our worldwide capacity has increased by 1.2 million cbm, to a total
of 35.9 million cbm as per the end of HY1 2017.
1 Only acting as operator; Vopak Terminals Singapore (in which Vopak holds 69.5%) has a 45% interest in a joint service
company.
Once completed, all projects currently under development will add 3.2 million cbm of storage capacity
to our global network (on a 100% basis) in the period up to and including 2019.
Note: ‘Storage capacity’ is defined as the total available storage capacity (jointly) operated by the Group at the end of the
reporting period, being storage capacity for subsidiaries, joint ventures, associates (with the exception of Maasvlakte Olie
Terminal in the Netherlands, which is based on the attributable capacity, being 1,085,786 cbm), and other (equity) interests and
operatorships, and including currently out of service capacity due to maintenance and inspection programs.
16
Results HY1 2017 by division
Netherlands
Revenues of the Netherlands division amounted to EUR 235.4 million for the first half year of 2017,
a decrease of EUR 16.5 million (7%) compared to the same period prior year (EUR 251.9 million).
This was for the larger part due to the absence of a positive market sentiment for the storage and
handling of oil products and temporarily higher out-of-service capacity at our chemical terminals.
The average occupancy rate for the division decreased by five percentage points to 91% from 96% in
HY1 2016.
Group operating profit -excluding exceptional items- decreased by EUR 26.4 million (28%) to
EUR 69.1 million (HY1 2016: EUR 95.5 million). This decrease was mainly caused by lower revenues
and higher operating expenses, among others related to IT initiatives.
An exceptional loss of EUR 2.1 million was recognized for an impairment related to a scope change of
a business development project.
Europe, Middle East & Africa (EMEA)
Revenues in the EMEA (Europe, Middle East & Africa) division decreased by EUR 12.5 million (12%)
to EUR 89.0 million (HY1 2016: EUR 101.5 million). Excluding the positive currency translation effect
of EUR 1.7 million, the decrease amounted to EUR 14.2 million. The decrease was primarily caused
by the effect of the divestments early 2016 of EUR 17.1 million. The average occupancy rate for the
division decreased by three percentage points to 92% from 95% in HY1 2016. This decrease was
among others was caused by the divestment of the UK assets early 2016.
17
Group operating profit -excluding exceptional items- decreased by EUR 9.9 million (23%) to
EUR 33.3 million (HY1 2016: EUR 43.2 million). Excluding a positive currency translation effect of
EUR 1.3 million, the decrease amounted to EUR 11.2 million. The divestments of early 2016 had a
negative effect of EUR 9.0 million.
Additional capacity of 0.4 million cbm in total is currently under construction.
Asia
In the Asia division, the revenues for the first half year of 2017 increased by EUR 2.2 million (1%) to
EUR 194.1 million (HY1 2016: EUR 191.9 million). Excluding the positive currency translation effect of
EUR 3.6 million, the revenues were slightly lower compared to prior year. The average occupancy
rate for the division decreased by two percentage points to 90% from 92% in HY1 2016.
Group operating profit -excluding exceptional items- decreased by EUR 4.5 million (4%) to
EUR 112.8 million (HY1 2016: EUR 117.3 million). Excluding the positive currency translation effect of
EUR 2.0 million, the group operating profit -excluding exceptional items- decreased by
EUR 6.5 million. This decrease was mainly caused by the lower results from joint ventures and
associates and the slightly lower revenues, while the operating expenses remained in line with prior
year. The competitive environment in China remains challenging. Furthermore, it is not expected that
the main customer of Vopak Terminal Haiteng will restart its production before 2018.
Additional capacity of 2.1 million cbm in total is currently under construction.
18
Americas
In the Americas division, the revenues in the first half year of 2017 of EUR 149.9 million were
EUR 15.8 million (12%) higher than the revenues of the same period prior year
(HY1 2016: EUR 134.1 million). Excluding the positive currency translation effect of EUR 3.3 million,
the increase amounted to EUR 12.5 million. This increase was mainly due to the improved occupancy
rate of our terminals in Mexico and Brazil and the operatorship fee for the terminal in Panama.
The average occupancy rate for the division decreased by two percentage points to 90% from 92% in
HY1 2016.
Group operating profit -excluding exceptional items- increased by EUR 4.5 million (11%) to
EUR 44.9 million (HY1 2016: EUR 40.4 million). Excluding the negative currency translation effect of
EUR 1.3 million, the increase amounted to EUR 5.8 million. The increase was mainly caused by the
higher revenues, which were partially offset by an increase on the operating expenses. The increase
in the expenses relates to a large extent to our operations in Panama.
Additional capacity of 0.7 million cbm in total is currently under construction.
LNG
The LNG activities consist of the joint venture results of Gate Terminal (the Netherlands) and Altamira
LNG Terminal (Mexico) and costs related to our LNG project studies. Group operating profit -
excluding exceptional items- from global LNG activities amounted to EUR 17.3 million, which is an
increase of EUR 1.3 million (8%) compared to prior year (HY1 2016: EUR 16.0 million).
Global functions, corporate activities and others
The global operating costs decreased by EUR 2.1 million (10%) to EUR 19.3 million
(HY1 2016: EUR 21.4 million).
19
Statement by the Executive Board
In accordance with the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht),
section 5:25d, paragraph 2 sub c, we confirm that, to the best of our knowledge:
● the condensed interim consolidated financial statements for the six months ended 30 June
2017 have been prepared in accordance with IAS 34 (Interim Financial Reporting) as adopted
by the European Union and give a true and fair view of the assets, liabilities, financial position
and profit or loss of Koninklijke Vopak N.V. and its consolidated companies (jointly referred to
as the ‘Group’); and
● the interim management report for the six months ended 30 June 2017 gives a fair review of
the information required pursuant to section 5:25d, subsections 8 and 9 of the Dutch Financial
Markets Supervision Act.
Rotterdam, 17 August 2017
The Executive Board
Eelco Hoekstra (Chairman of the Executive Board and CEO)
Jack de Kreij (Vice-Chairman of the Executive Board and CFO)
Frits Eulderink (Member of the Executive Board and COO)
Auditor's involvement
The content of this report has not been audited or reviewed by an external auditor.
20
Condensed interim consolidated financial statements
Consolidated statement of income
21
Consolidated statement of comprehensive income
Note: All amounts are net of tax.
22
Condensed consolidated statement of financial position
23
Condensed consolidated statement of changes in equity
24
Condensed consolidated statement of cash flows
25
Segmentation
1 Exceptional items are disclosed in note 4.
26
Notes to the condensed interim consolidated financial statements
1. General
Koninklijke Vopak N.V. (‘Vopak’) is a listed company registered in the Netherlands with activities in
25 countries. These condensed interim consolidated financial statements for the first half year of 2017
contain the figures of the company and its subsidiaries (jointly referred to as the ‘Group’), as well as
the interests of the Group in joint ventures and associates.
The Executive Board approved these condensed interim consolidated financial statements on
17 August 2017.
1.1. Basis of preparation
These condensed interim consolidated financial statements for the six months period ended
30 June 2017 have been prepared in accordance with IAS 34 Interim Financial Reporting. They do
not contain all the information and disclosures required in the annual financial statements, and should
be read in conjunction with the audited financial statements included in the 2016 Annual Report,
which have been prepared in accordance with IFRS as adopted by the European Union.
1.2. New standards, interpretations and amendments adopted by the Group
The applied accounting principles adopted in the preparation of the interim consolidated financial
statements are consistent with those described in Vopak’s 2016 Annual Report.
The group did not implement any new standards, amendments to existing standards or new IFRIC
interpretations that materially impact the consolidated financial statements of the Group for the
financial year 2017.
1.3. New standards not yet adopted by the Group
IFRS 15 - Revenue from contracts with customers
The IASB published IFRS 15 ‘Revenue from contracts with customers’ in May 2014. This standard
contains principles that an entity will apply to determine the measurement of revenue and timing when
revenue is recognized. The underlying principle is that an entity will recognize revenue to depict the
transfer of goods or services to customers at an amount that the entity expects to be entitled to in
exchange for those goods or services. This new standard will be effective as of 1 January 2018 and
has been endorsed by the European Union. The company has finalized its assessment of the effects
of this new standard in 2016. It was concluded that the effects on the annual result will be limited,
apart from the fact that additional disclosures will need to be provided.
IFRS 9 - Financial instruments
This standard addresses the classification, measurement and recognition of financial assets and
financial liabilities. The complete version of IFRS 9 was issued in July 2014. This new standard
replaces the guidance in IAS 39. This new standard will be effective as of 1 January 2018 and has
been endorsed by the European Union. The company has finalized its impact assessment of IFRS 9
‘Financial Instruments’ in 2016. It was concluded that the new hedge accounting requirements will
provide more flexibility to the company as it is more aligned with the financial risk management
policies of the company, but that the direct financial effects of the new standard - including those
relating to the new impairment requirements - will be limited.
IFRS 16 - Leases
The IASB published IFRS 16 ‘Leases’ in January 2016. IFRS 16 will require almost all leases of
companies to be on the balance sheet of lessees and introduces a single income statement model
which basically treats all leases as finance leases. Lessor accounting has not changed significantly.
27
This new standard will be effective as of 1 January 2019 and has not yet been endorsed by the
European Union. The company has started its impact assessment of this new standard.
It has been concluded that in most cases the services that Vopak provides to its customers do not
contain a lease due to the absence of an identified asset. As the definition of a lease under IFRS 16 is
substantially the same as under the current IAS 17, this conclusion is the same under both standards.
As such, Vopak does not act as a lessor for most contracts in line with the current accounting
treatment.
Furthermore, as the company has a large portfolio of long-term land leases and leases of other non-
current assets, the impact on the statement of financial position and the result of the company of
applying the new standard is estimated to be material from a lessee perspective.
There are no other new standards, amendments to existing standards or new IFRIC interpretations
that are not yet effective, that are expected to have a material impact on the Group.
1.4. Critical accounting estimates and judgements
The preparation of the condensed interim consolidated financial statements requires management to
make judgments, estimates and assumptions that affect the application of accounting policies and the
reported amounts of assets and liabilities, income and expense. Actual results may differ from these
estimates.
In preparing these condensed interim consolidated financial statements, the significant estimates and
judgments made by management in applying the Group’s accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the consolidated financial statements
as at and for the year ended 31 December 2016, except for the following:
(a) Taxes
Taxes on income in the condensed interim consolidated financial statements are accrued using the
weighted average tax rates that would be applicable to the expected annual profit before income tax.
(b) Recoverable value of non-current assets
The carrying amount of goodwill is tested for impairment annually in the fourth quarter, unless there is
reason to do so more frequently. All other non-current assets are tested for impairment whenever
events or changes in circumstances indicate that the carrying amounts for those assets may not be
recoverable.
There were no material impairments recognized in the first half year of 2017.
The value in use of the cash generating units (CGUs) is based on estimates of future expected cash
flows (value in use) made on the basis of the budget for the coming year and two subsequent plan
years, which form the basis for the 15-year period discounted cash flow model. Fair value less cost of
disposal is primarily based either on comparable market-multiples and/or (indicative non-)binding bids
or discounted cash flow models from the perspective of a willing buyer in an orderly transaction.
Sometimes the fair value less the cost of disposal is based on (non-binding) preliminary offers
received (level 3 fair value). Although such offers are conditional/preliminary, management always
assesses if the offers received are representative of fair value. Please note that in determining the
recoverable value of a terminal, management has to make certain judgments and estimates regarding
the value in use or fair value less cost of disposal. A change in these judgments and estimates at a
later date may result in future (reversal of) impairments.
28
(c) Non-current assets held for sale
The assets held for sale as at the end of the first half year of 2017, comprises a business
development joint venture in China. This immaterial divestment has been completed in July 2017.
(d) Changes in judgments and estimates with regards to legal cases
There were no material changes in the facts and circumstances after year-end 2016 regarding certain
legal cases.
2. Acquisitions, divestments and newly established entities
Newly formed associate
In the second quarter of 2017, Vopak entered into an associate and will invest together with its
partner Altagas in the development of the Ridley Island Propane Export Terminal (RIPET). RIPET is
expected to be the first propane export facility off the west coast of Canada. The project is to be
designed to ship 1.2 million tonnes of propane per annum, with approximately 96,000 cubic meters of
storage capacity. The facility is expected to be commissioned in Q1 2019.
Vopak has a 30 percent interest in RIPET. Vopak's investment is underpinned by long-term customer
contracts and is fully aligned with Vopak's long-term strategy where storage and handling of gas has
been earmarked as one of the strategic focus areas. Canada has a structural surplus in gas and
natural gas liquids for which Asia is an important market to export these energy products.
There were no other significant changes in the composition of the Group in the first half year of 2017.
Earlier announced acquisition no longer pursued
On 21 December 2016, Vopak and Exmar announced they reached a conditional agreement on the
acquisition by Vopak of Exmar's participation in FSRU assets. As previously stated, the finalization of
the deal was subject to consent and cooperation of multiple stakeholders.
On 26 April 2017, after careful consideration, Vopak and Exmar have concluded that these
requirements will not be met on the envisaged transaction. Therefore the closing of the FSRU
transaction between Vopak and Exmar was no longer pursued.
For a list of the principal subsidiaries, we refer to note 8.11 of the 2016 Annual Report.
29
3. Financial risk management
The Group’s financial risk management objectives and policies are consistent with those disclosed on
page 129 of the 2016 Annual Report.
The interim condensed consolidated financial statements do not contain all financial risk management
information and disclosures required in the annual financial statements.
3.1. Financial instruments
Set out below is an overview of carrying amounts and the fair values of financial instruments held by
the Group as at 30 June 2017.
Where available, fair value measurements are derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities (level 1). In the absence of such information, other observable
inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices), are used to estimate fair
values (level 2). Level 3 is based on valuation techniques for which the lowest input that is significant
to the fair value measurement is unobservable.
During the six-month period ended 30 June 2017, almost all fair values of financial instruments
measured at fair value in the statement of financial position are level-2 fair values. There are no
material level-1 or level-3 financial instruments. Therefore, there were no material transfers between
level-1 and level-2 fair value measurements, and no material transfers into or out of level-3 fair value
measurement.
The disclosed fair value of the Private Placements, revolving credit facility and other long-term bank
loans are measured by discounting the future cash flows using observable market interest information
(level 2) as no similar instrument is available due to the specific profile of the instruments.
30
The fair value of interest rate swaps, cross currency interest rate swaps and forward exchange
contracts are determined by discounting the future cash flows using the applicable period-end yield
curve (level 2).
There were no changes in valuation techniques used during the periods.
3.2. Liquidity risk
The Group’s net interest bearing debt position at 30 June 2017 amounted to EUR 1,767.6 million
(31 December 2016: EUR 1,804.2 million). The Senior net debt : EBITDA ratio increased to 2.20
compared to 2.04 per year-end 2016, which is well below the maximum agreed ratios in the
covenants with the lenders.
4. Exceptional items
The items in the statement of income include items that are exceptional by nature from a
management perspective. For the definition of exceptional items applied by the company, reference is
made to the glossary. The material exceptional items are disclosed separately in the notes when
relevant in order to increase transparency.
In the first half year of 2017 there were no material exceptional items. The minor impairment of
EUR 2.1 million, related to a scope change of a business development project in the Netherlands.
31
Reconciliation of IFRS figures to income statement -excluding exceptional items-
5. Intangible assets, property, plant & equipment and financial assets
Total investments in property, plant and equipment (including capitalized interest) during the first half
year of 2017 were EUR 116.5 million (HY1 2016: EUR 139.5 million), of which EUR 26.2 million
(HY1 2016: EUR 41.0 million) was invested in the expansion of existing terminals and the
construction of new terminals.
32
6. Joint ventures and associates
Vopak holds interests in 28 (YE 2016: 28) unlisted joint ventures and 5 (YE 2016: 4) unlisted
associates. Although the Group conducts a large part of its activities by means of these joint ventures
and associates, none of these entities are currently individually material for the Group.
The nature of, and changes in, the risks associated with its interests in joint ventures and associates
is primarily linked to the region and/or the nature of the activities. For the disclosure of the nature,
extent and financial effects of our joint ventures we make a distinction in the activities of the division
Europe, Middle East & Africa (mainly oil storage terminals), LNG (joint ventures with long-term
contracts), and Asia (mainly industrial terminals).
For an overview of the principal joint ventures and associates we refer to note 8.11 of Vopak’s 2016
Annual Report.
6.1. Movements in Vopak's share of total comprehensive income and the carrying
amount of joint ventures and associates
Vopak’s share in the total comprehensive income and the net assets of our joint ventures and
associates is follows:
6.2. Other arrangements in respect of joint ventures and associates
The Group has the following commitments and contingencies with regards to its joint ventures and
associates:
33
The notional amount of guarantees and securities provided on behalf of participating interests in joint
ventures and associates, included in the calculation of the bank covenant ratios, decreased from
EUR 100.4 million at 31 December 2016 to EUR 94.9 million at 30 June 2017. Of this amount
EUR 0.1 million (YE 2016: EUR 0.1 million) was recognized in the statement of financial position.
6.3. Summarized statement of financial position of joint ventures and associates on a 100%
basis
6.4. Summarized statement of total comprehensive income of joint ventures and associates on
a 100% basis
The information above reflects the amounts present in the financial statements of the joint ventures
and associates adjusted for differences in accounting policies between the group and the joint
ventures and associates and, when applicable, the effects of the purchase price allocation performed
by the Group with regards to the acquisition of the joint venture or associate.
7. Issued capital, share premium and treasury shares
Movements in the number of shares, the issued capital and the share premium were as follows:
A dividend of EUR 1.05 per ordinary share (HY1 2016: EUR 1.00 per ordinary share) with a nominal
value of EUR 0.50, or EUR 133.9 million in total (HY1 2015: EUR 127.6 million), was paid in cash on
26 April 2017.
34
Share-based payments arrangements:
During the first half year of 2017, 118,401 shares were transferred to employees in relation to the
settlement of Long-Term Incentive Plans. During the period a new Long-Term Incentive Plan, for the
period 2017-2019, has been granted to the Executive Board and senior management.
8. Borrowings
8.1 Net debt reconciliation
The movements in the net interest-bearing debt were as follows:
During the first half year of 2017, EUR 102.7 million (EUR 12.5 million and USD 100 million)
(HY1 2016: EUR 346.8 million) of debt repayments took place. For the remainder of 2017,
EUR 63.8 million (EUR 20 million and USD 50 million) of regular repayments on long-term loans are
scheduled.
8.2 Average remaining maturities and main covenant ratios
35
8.3 Financial ratios reconciliation
The Senior net debt : EBITDA ratio was 2.20 as at 30 June 2017, which is higher than the previous
period (30 June 2016: 2.16), and well below the maximum agreed ratios in the covenants with the
lenders.
9. Contingent liabilities
The investment commitments undertaken for subsidiaries amounted to EUR 257.9 million at
30 June 2017 (YE 2016: EUR 106.1 million). The increase is primarily related to the announced
capacity expansions, mainly in the Americas and South Africa. For more information, reference is
made to the ‘Storage Capacity Developments’ paragraph of this report.
For an overview of the commitments to provide debt or equity funding for joint ventures and
associates, and for guarantees and securities provided on behalf of participating interests in joint
ventures and associates, we refer to note 6.2.
There are no significant changes in the contingent liabilities per the end of June 2017 compared to the
contingent liabilities disclosed in note 8.8 in our 2016 Annual report.
10. Related party disclosures
For the details on the nature of the Group’s related parties, reference is made to section 6 in our 2016
Annual Report. No significant changes have occurred in the nature of our related party transactions.
There were no changes in arrangements with major shareholders in addition to the ones disclosed in
the 2016 Annual Report. Besides the dividend distribution, no related party transactions have been
entered into with the major shareholders during the first half of this year.
No related party transactions, which might reasonably affect any decisions of the users of these
condensed consolidated financial statements, were entered into during the first half year of 2017.
11. Subsequent events
There are no material events after the balance sheet date.
36
Enclosures
1. Non-IFRS proportionate financial information
Basis of preparation
Vopak provides Non-IFRS proportionate financial information -excluding exceptional items- in
response to requests by multiple investors to provide additional operational performance insights on a
comparable basis for subsidiaries, joint ventures and associates. In this disclosure, the joint ventures
and associates and the subsidiaries with non-controlling interests are consolidated based on the
economic ownership interests of the Group in these entities.
In the tables in this section, we provide the proportionate financial information for the statement of
income, the statement of financial position, and the segment information for each of our reportable
segments. Where applicable, we show a reconciliation with our IFRS figures in order to create
comparability with the proportionate information. Other information is based on the same principles as
applied for the proportionate financial information.
Proportionate information
37
2. Key results second quarter
38
3. Glossary
CFROGA - Cash Flow Return on Gross Assets Before Interest and After Tax
The ‘Cash Flow Return on Gross Assets’ (CFROGA) is defined is EBITDA -excluding exceptional
items- minus the statutory income tax charge on EBIT divided by the average gross assets (historical
investment). This measure is used by the company to assess the cash-flow based performance trend
of its operations.
EBIT - Earnings Before Interest and Tax
Net income, before income taxes, and before net finance costs. This performance measure is used by
the company to evaluate the operating performance of its operating entities.
EBITDA - Earnings Before Interest, Tax, Depreciation and Amortization
Net income, before income taxes, before net finance cost, and before amortization and depreciation
expenses. EBITDA is a rough accounting approximate of gross cash flows generated. This measure
is used by the company to evaluate the financial performance of its operating entities.
Exceptional items
A limited set of events pre-defined by the company which are not reflective of the normal business of
the company and which are exceptional by nature from a management perspective. These
exceptional items include impairments, reversed impairments, additions to and releases from
provisions for restructuring, results on assets sold, gains on the sale of subsidiaries, joint ventures
and associates, any other provisions being formed or released and any significant change in
estimates.
The Group does not apply a threshold for impairments, reversal of impairments, disposal of
investments and discontinued operations. For the other items, the Group considers an event
exceptional when the effect exceeds the threshold of EUR 10.0 million.
Gross Assets / Gross capital employed
Gross Assets are based on the carrying amount of non-current assets, excluding loans granted,and
are grossed up by means of adding back the accumulated depreciation, amortization and impairment.
Subsequently, the net trade working capital (trade debtors minus trade creditors) is added. Balances
related to assets under construction are excluded from the gross assets. The average historical
investment is based on the quarter-end balances in the measurement period relevant to the quarter
concerned.
ROCE - Return On Capital Employed Before Interest and Tax
EBIT -excluding exceptional items- as a percentage of the average capital employed. This
performance measure is used by the company to assess the profitability and the efficiency of its
operations in relation to the capital is employed.
ROE - Return On Equity After Interest and Tax
Net income -excluding exceptional items- as a percentage of the average equity employed. This
performance measure is used by the company to assess the return that the company generates with
the equity funds provided by its shareholders.